TASHKENT

Uzbekistan has placed two tranches of Eurobonds in the amount of $635 million at 3.9 percent and 2.5 trillion soums ($235 million) at 14 percent on the London Stock Exchange (LSE) to finance the construction of schools, hospitals and water supply systems in the Central Asian country.

Demand for the dollar tranche, with a maturity of 10 years,  exceeded $1 billion, and 2 trillion soums for the tranche of three-year bonds in national currency. Initial interest rates were in a range of 4.25-4.375 percent and 14.5 percent respectively.

Investment funds were the main buyers for both the dollar and soums Eurobonds. Dollar eurobonds were mostly bought by U.S. and U.K. investors, and soum eurobonds were purchased by U.K. and European investors.  The organisers of the issue were Citi, Gazprombank, J.P. Morgan and MUFG.

Uzbekistan is reforming its once centralised economy after more than two decades of economic isolation. President Shavkat Mirziyoyev has made attracting foreign investors one of his top priorities in measures that have included liberalising the country’s foreign exchange market and modernising business practices, cutting down on the Soviet-era bureaucracy that still holds many of the country’s companies back.

Uzbekistan first tapped the Eurobond market in February 2019 by selling $1 billion worth of five and ten-year bonds with a yield of 4.75 percent and 5.375 percent. The offering was split into two tranches of $500million, due in 2024 and 2029. According to the Finance Ministry, demand for the bonds exceeded $8.5 billion. In November 2020, the ex-Soviet country placed another two tranches of three- and 10-year Eurobonds denominated in dollars and soums, to the amount of $750 million.

Last year Uzbekistan secured preliminary agreements for more than $3 billion in long-term soft loans and grants from international financial institutions, and may attract more, temporarily increasing the cap on borrowings, Reuters reported.

The government said it would use the borrowed funds to combat the spread of coronavirus and support its economy as the global recession hit. The Central Asian nation had previously decided to limit annual foreign borrowings by the public sector to $4 billion, but the government planned to review the figure due to the COVID-19 crisis.

The country’s financing needs will depend on how long the pandemic continues, Odilbek Isakov, deputy finance minister, said last year, and Tashkent will stick to its other self-imposed limit capping foreign debt of the public sector at 50 percent of gross domestic product.